Debenhams hails good Christmas as beauty and online shine, fashion market share is stable

By

Sandra Halliday

Published
Jan 12, 2017

"Beauty and gifts support good Christmas performance”. That was the opening line of the Debenhams trading update Thursday morning and it echoed what the company has been saying recently about its key growth areas as it seeks to reduce its reliance on the volatile clothing sector.

It seems to be working. The department stores chain said that the 18 weeks to January 7 saw group gross transaction value up 3.7% and comparable sales up 3.5%. But within that, sales at constant exchange rates were weaker and rose only 0.5%, with UK comparable sales managing an increase of only 1%.

In the more Christmas-focused period, the seven weeks to January 7, the performance appears to have improved with comparable sales up 5% (or 1% at constant exchange rates) with online ahead by 17%.

Internationally, the UK firm said Magasin du Nord in Denmark saw a tougher trading environment while the Republic of Ireland “maintained steady performance after successfully exiting Examinership.”

Back with its UK performance over the 18 weeks, it had good news around online sales, which rose 13.9%, for a two-year growth rate of over 25%. This is particularly significant as analysts had been concerned over how well Debenhams was responding to the omnichannel revolution.

The company said momentum has strengthened in omnichannel sales growth, driven by smartphone demand rising 68%, with an increased uptake in premium delivery services as its customers respond to the improvements it has introduced.

“We again saw a successful Black Friday event with strong year on year growth both online and in our stores,” it added.

So what sold well over the period? Debenhams said it made further progress in growing non-clothing categories in line with its strategy. Beauty and Gift sales grew strongly to take the non-clothing sales mix in the reporting period to 57%

But while clothing is less than half of its business now, it “maintained market share in a competitive clothing market” while continuing to reduce the number of clothing options as well as the level of discounts, with stocks down 7% year on year.

And those discounts - or lack of them - were key. The retailer continued to reduce promotional activity, with a sixth season of reduced markdowns and a 2% improvement in full price sell-through in the period.

CEO Sergio Bucher said: "I'm pleased with the performance we have achieved in the key trading weeks of Black Friday and over the Christmas peak, given the challenges in the broader environment and the strong performance last year. The resilience of Debenhams' differentiated offer is beginning to show through, with the growth we have driven in beauty and gifting. It's encouraging to see that the service improvements we have made helped us to deliver strong multi-channel sales growth.”